AVR Freaks

I don't know if Atmel has a special bootloader that you can burn and talk directly to Studio. But even if they did, to burn it would require an external programmer, the bootloader can't replace itself AFAIK.

If you have an extra Arduino, you can use it as a programmer. In fact, you can use it as an STK500v2 programmer that can talk directly to Studio, this is simpler than using avrdude IMO.

If you want, I can explain how to do it, it takes a few steps.

Good. Probably you are using the ArduinoISP sketch. Replace it with the ScratchMonkey sketch instead, you can get it here: https://github.com/microtherion/...

Once you download ScratchMonkey, you need to do some simple modifications before uploading to the Arduino:

1) In the file SMoGeneral.cpp find variable kSoftwareMinor and replace it's value by 0x0A.

2) In the same file, find the SMoGeneral::SignOn() function. There is a line that says "#if 0", replace by "#if 1".

Now upload the modified sketch to the programmer Arduino, it will become STK500v2 compatible and can talk to Atmel Studio.

But you also need to disable the auto-reset feature of the Arduino. Put a 220 or 470 nF capacitor between Reset and +5V. Now it's ready to connect to AS.

Of course the code will be just as good, nearly identical actually. It's assembly, it can't really vary.

3) What is the cheapest / simplest route to go (hardware and software)?

Aside from using the Arduinos you already have, an "Atmel ATmega328p Xplained Mini"  runs about $10, and works "natively" with Atmel Studio (including debugging.)  It's also more-or-less an Arduino clone ("Shields" fit, though you might have to add connectors.)

It seems from the last two posts my Arduino bootloader is a bit of a bottle neck.

It's not really a "bottleneck" (which usually means "slows things down"), but it doesn't have native support from Atmel Studio.  And an Uno-class Arduino needs hardware modifications to support debugging, even if you had an external debug tool.

 so can i burn my chip with the "correct" Atmel/AVR Assembler bootloader from with in studio 7 and thus have a nice clean simple IDE?

 I would hesitate to ever describe Atmel Studio as either "clean" or "simple."  At best, it's professional, powerful, and The Standard environment for programming AVRs.

(I see you're discovering this, from your install attempts.)

If nothing else, using AS7 may give you a new appreciation for why the Arduino IDE exists, and what it does "right"...

The ASM [blink] is about 400 bytes (give or take). ... I would have thought the ASM would be much smaller?

 400 bytes sounds a bit on the large size, but with the "normal" compile environment, you'll probably be still including over 100 bytes of interrupt vectors and some startup code.

I would stongly advise that you stick with Arduino.
Write/replace selected Arduino functions.
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What makes you think ASM is important?
Yes, having optimised a particular Arduino function in C++ or C, you can see if you can make any significant improvement in ASM.
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In practice, knowledge and experience in C++ is far more attractive to employers.
Knowing how to find bottlenecks and optimise with a few lines of ASM is sometimes useful.
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Oh, and unless I want to examine a short sequence with debugWIRE, I generally upload with the bootloader.
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David.

The Arduino development model combines all the aspects of microcontroller [MCU] design and implementation into a single reasonably-well integrated system.  It extends beyond the standardized C++ definition by adding keywords to handle common MCU operations and tested libraries for more complex operations like interfacing to complex peripherals like intelligent sensors and TFT displays.  But it does have the reputation of being stupid and ugly.  

The colors of the Arduino IDE are adjustable, but these adjustments are hidden in the default.xml file in c:\Arduino-x.x.x\lib\theme\syntax\ folder and the theme.txt file in c:\Arduino-x.x.x\lib\theme\ folder.

Atmel Studio shines when compiling code for AVR devices that aren't covered by Arduino, which is all of them expect the mega328P, the mega2560, and mega32u4 (the Leonardo).  There is a reduced version of Arduino for the 8 and 14 pin AVRs Tiny85 and Tiny84, but it is more "proof of concept" than useful for complex applications.

Assembler will start to drive you crazy when the code gets more than about twenty pages long and it is not very well structured and documented, which it won't be when you're learning it.  As for the extended instructions like digitalWrite() that are sometimes shown to take lots more instruction cycles than necessary, they can often be replaced by macros that compile into code that is as small and concise as that written in assembler. 

Study the library code that is available for commonly used peripherals.  Limor Fried's (Lady Ada of Adafruit) library code is pretty good, and David Prentice's MCUfriend code for TFT devices is worth a good study.  The Mat Hertel library for the various 50-cent FM radio ICs is a good place to see how structured classes and callback functions can all fit together.  The Adafruit library for NeoPixels shows how to use Arduino C++ with inline assembly for applications that need microsecond precision but also need to call background functions to handle LED patterns and setup complex peripherals.

Normally, what I do is write most of the code in C or C++. But if some function needs to be extra fast or needs to have exact timing, I may write it in assembly.

Another problem is if your code is getting too large for your goals. Arduino libraries are somewhat bloated, but avr-libc is ok. But libraries always need to consider every possible situation. So if you have some special case and need smaller code, it may be necessary to write your own functions.

Deep within the bowels of the Arduino install, there is the file "platform.txt", that has the compiler and link options. In fact there are several of these files, in my Windows 7 system, the user level one is at:

(home)\AppData\Local\Arduino15\packages\arduino\hardware\avr\1.6.20\platform.txt

I suppose you could add -nostartfiles somewhere in this file.

It's also possible to create new hardware profiles with their own "platform.txt", but all this doesn't seem to be very well documented.